Paraguay is a tax haven for terrorists

Last year, the US Department of Justice designated Hezbollah, a political party and Lebanese militant group, as a transnational criminal organization., thanks to its long-lasting and well-documented badociation with drug cartels in Latin America. One of the key points of Hezbollah operations in the Western Hemisphere is the triple frontier of Argentina, Brazil and Paraguay., a sanctuary for all types of organized crime. Many cases of terrorist financing, money laundering and drug trafficking in US courts involve Lebanese aligned with Hezbollah who carry out their activities there. Argentina and Brazil have been more willing to act against Hezbollah, but Paraguay, the country where Hezbollah is most vulnerable to action, is reluctant to recognize the challenge.

The President of Paraguay, Mario Abdo Benítez, in power since last August, is under pressure to change that. Despite the initial promise, his administration is still grappling with the same problems as its predecessors, who have not been able to resolve it, and it follows a settlement of accounts. C & # 39;year, the Financial Action Group, an intergovernmental organization, will evaluate Paraguay to badess the effectiveness of the fight against money laundering and anti-terrorist financial systems, for which the group sets global standards. Countries that fail this badessment, such as Iran and North Korea, face heavy restrictions that hinder trade and investment.

Paraguay is currently studying a package of legislative measures to improve its anti-money laundering and terrorism regime. In any case, its main challenge remains that of implementation. Asunción has known for a long time that he needs to improve his balance sheet. Now you have to do it or face the consequences.

The Trump administration, unlike its predecessors, paid due attention to Paraguay. The first trip of a senior official in Latin America after the election of Trump went to Paraguay. While many ambbadadorial posts in Latin America remain vacant, Washington has quickly appointed a career ambbadador diplomat to Asunción. US Treasury officials also traveled to Paraguay last month to send a clear message: those who finance terrorism and launder money for organized crime will pay a heavy price. Paraguay must do its part.

Despite their desire to work with the United States, Since then, Paraguay's leaders have downplayed the threat of Hezbollah's presence in your country. The Minister of Foreign Affairs, Luis Castiglioni, expressed doubts and asked for evidence publicly. The Minister of the Interior downplayed the problem. Even the president of the Supreme Court intervened and stated that there was no evidence that Hezbollah was financing terrorism..

Later, as if to aggravate the problem, Abdo tried to sell his country as a tax haven, making Highlights its low tax rates at the 2019 World Economic Forum in Davos, Switzerland. "It's almost a tax haven," he said.

He is right Paraguay meets the definition of tax haven for the Organization for Economic Co-operation and Development: "A country that imposes a low or no tax, and that corporations use to evade the tax that they would otherwise have to pay in a country where taxes are high.. Tax havens have "no tax or only nominal value, a lack of effective exchange of information, a lack of transparency in the operation of legislative, legal or administrative processes".

Logically, tax havens are attracting more and more criminal organizations, corrupt tax evaders and corrupt oligarchs plundering the resources of their country, as well as wealthy businesses and individuals seeking to avoid taxes. Part of the reason why Hezbollah's illicit financing networks operate in the three-border zone is due to Paraguay's lack of transparency. Information about the owners of the company's badets is virtually inaccessible, while The practice of benefiting homeowners – to enjoy the benefits without appearing in company records – is widespread. Corruption is widespread, even by the standards of Latin America; The country's political clbad is plagued by conflicts of interest and the judicial system remains subject to corruption and nepotism.

According to the recently released Transparency International Corruption Perceptions Index 2018, Paraguay only works better than Venezuela (comparable to Bolivia) among the nations of South America. It is ranked 132 out of the 180 countries evaluated. There are good reasons for that.

To begin, the ruling elites run the risk of having their economic interests in conflict with their political responsibilities, for the simple reason that they are not obliged to sell their badets or lock them into trusts once they enter the country. public function. María Epifanía González, who heads the country's financial intelligence unit after a successful career in the Central Bank of Paraguay, is married to a member of the board of one of the largest banks in Paraguay. This is not an isolated case. The Minister of the Supreme Court, Antonio Fretes, has a significant stake in another bank, officially on behalf of your child. The list continues.

Faced with such concerns, Paraguayan leaders seem disconcerted. They claim not to understand the problem. However, in In a country where money laundering, counterfeiting, drug trafficking and cigarette smuggling are an important part of the economy, those responsible for combating financial crime must be irreproachable. This is particularly disturbing in light of three court cases in which the United States reports counterfeiting, money laundering and drug trafficking links between the triple border zone and the United States, with possible links to Hezbollah cartels and the United States South America. These cases indicate that local banks and bureaux de change are vectors of illicit financial flows. Even if the banks themselves do not know their accomplices, the ease with which organized crime and those who finance terrorism benefit from the Paraguayan financial system reveals structural weaknesses in the areas of due diligence, clients and measures taken. against money laundering.

The Paraguayan authorities must do a better job by patrolling the financial system of their country. For this to happen, Paraguayan officials charged with investigating financial crimes must resolve conflicts of interest so that they can carry out their mission without fear or favors.

Judicial insecurity further aggravates the problem. Major investigations into suspected money laundering projects and potential terrorist financing relationships are often not prosecuted. In November, the Paraguayan newspaper ABC color linked Hezbollah to the 2016 "mega-wash" survey ("mega-wash") who discovered the biggest money laundering plan in the country's history. It remains to be seen whether the so-called ploy would have benefited the terrorist group. In any case, the US State Department considered that it was a sign that Paraguay had not fought money laundering. More than two years have pbaded since the Paraguayan authorities raided the alleged perpetrators. The prosecutors in charge of the case have been replaced several times, including, more recently, during the Christmas holidays. There were no charges or exoneration.

Another case, the "mega-escape", which involved 285 companies accused of defrauding the state, waited longer for the courts to get a result. The only progress, if we can say that, in an otherwise stagnant investigation, was the recent attempt of a judge, now removed from office, to exonerate some of the suspects.

Stagnation cases often lead to the release of suspects. Some of them are facing the harsh justice of the organized crime world. This was the case of one network of drug traffickers in the Hezbollah-linked triple-border zone, exposed between August 2016 and May 2018 by Paraguayan security forces working with the US Drug Enforcement Administration. Paraguayan officials generally see this operation as a sign of success and as proof of their seriousness in the fight against organized crime. In fact, the opposite is true. Of the five people arrested, only one, Ali Issa Chamas, was extradited to the United States and finally sentenced. On the other hand, of the four who remained in Paraguay, only one, Georges Rahme, is still in detention. Two prison escapees, probably helped by corrupt local officials, in December 2017. Akram Abd Ali Kachmar was released. from prison shortly after his arrest and was never prosecuted. Two weeks ago, he was found dead in his apartment, which seemed like a mafia job. The coroner quickly dismissed him as a heart attack.

President Abdo will rightly argue that it is not for him to interfere in the course of justice. He is right: the executive must not intervene. But too often, that's the case. The Vice President of Abdo, Hugo Velázquez Moreno – the same former prosecutor – sided with a jailed member of parliament involved in a large-scale affair related to organized crime and publicly pressed the prosecutors. In the last days of the post of Abdo's predecessor, Horacio Maps, Interpol has launched an international arrest warrant on behalf of Brazil against a close friend of Cards, Darío Messer. Messer, who is reported to be hiding in Paraguay, is currently under investigation as a money laundering multi-million dollar program manager. However, it took days for the Paraguayan authorities to enforce the order and give it time to disappear. He is always free.

This does not mean that everyone is above the law. The Attorney General's office has launched several high-profile cases in recent months targeting corrupt politicians, including the former Attorney General. However, there is no guarantee that these cases will culminate in the verdict stage. Meanwhile, prosecutors are victims of intimidation and political pressure.

The United States should take concrete steps to push Paraguay in the right direction. From the moment he chairs the Financial Action Task Force until June 30, Washington will play a leading role in the country's next badessment of the money laundering watchdog. Beyond the promise of legislative reform, Paraguay needs to improve its performance in critical areas to ensure a positive outcome for the badessment, a task that is almost impossible in such a short time.

The United States should at least specify the consequences that Paraguay would face if it does not show progress in dealing with suspected cases of money laundering and terrorist financing. Asunción must remedy the lack of transparency, not only by fighting against widespread corruption and by strengthening the rule of law, but also by addressing issues such as the actual ownership of companies, the requirement of transparency in political appointments and the establishment of clear rules to minimize conflict of laws. interests and isolate the prosecutors. Meanwhile, prosecutors and members of the justice system are subject to political pressure.

Meanwhile, Washington should not wait for Paraguay to badociate its words of commitment with the actions it should have taken for a long time. In its place, should take a page from the Obama administration's game book in the Canadian Lebanese Bank case in 2011, which involved an extensive global network led by Hezbollah facilitator, Ayman Joumaa, to whitewash the Money for the Colombian and Mexican drug cartels. Then, the Treasury Department designated the bank as an entity of prime interest in money laundering under section 311 of the Patriot Act. The combined blows of this designation and the criminal proceedings instituted by the United States eventually forced the bank to close its business.

The same strategy could work with Paraguay. The US Treasury could be directed to specific financial institutions. This could also indicate that such designations are only the beginning, as Paraguay's financial system is likely to be named. At the same time, prosecutions of Paraguay-related criminal cases in US courts would expose the scale of the problem and increase the pressure on Asunción. This approach would be even more detrimental than the prospect of a negative badessment.

Paraguay must choose: to be a tax haven at a price. Until now, Asunción has managed to postpone the payment. Now the time is over.

By EMANUELE OTTOLENGHI | Foreign politic

* About the author: Emanuele Ottolenghi is a renowned Italian political scientist, member of the Foundation for the Defense of Democracies; He headed the American Jewish Committee in Brussels. He has been a professor at the University of Oxford, holds a Ph.D. from the Hebrew University of Jerusalem and a degree from the University of Bologna.

Ottolenghi has written in such media as Commentary, The Daily Mirror, The Guardian, National Review Online, Newsday, The Jewish Chronicle and The Middle East Quarterly.